This is a blog by a former CEO of a large Boston hospital to share thoughts about negotiation theory and practice, leadership training and mentoring, and teaching.

Sunday, January 28, 2007

Do I get paid too much?

Every year, the Boston Globe publishes a story listing the total compensation received by the CEOs of the major Boston hospitals. The story is derived from the Forms 990 that are filed by every non-profit, and the numbers are interesting enough that the story always gets good placement in the newspaper.

CEOs do not set their own salaries. Each hospital has a public board of trustees who determine the compensation for their chief executives and who also hold that CEO accountable for running the organization. The levels of compensation are subject to review by the Internal Revenue Service to ensure that they are within reason for that organization and compared to other organizations, and also to ensure that the board itself, rather than the CEO, has made the compensation decision.

Notwithstanding this level of legal guidance, the issue often arises as to whether hospital CEO salaries are out of line. Americans are often ambivalent about high salaries for corporate executives: They often complain about them, but, at the same, time, everybody hopes that he or she can someday earn them! Putting aside that personal sociological observation, let me ask you the question directly: Do you think I earn too much?

Here are the facts. As noted by the Globe, my total compensation was about $1 million in fiscal 2005. Of this, $650,000 was the base salary. Also, I was eligible for a 30% incentive compensation payment if the hospital achieved specified results for clinical quality, patient satisfaction, and financial performance. I received the full amount that year, $195,000. The rest of the million comprised payments made by BIDMC for life insurance and retirement. (Don't worry, there are no other perks, like cars or country club memberships!)

Now, some background on BIDMC: The hospital is a billion-dollar-a-year enterprise, about $800 million in clinical revenues and $200 million in research programs. Our annual capital budget is roughly in the range of $80 million. Last year, we raised $30 million in philanthropic donations from people in the community. We have facilities that cover about 3 million square feet. We see 50,000 emergency room visitors per year, 40,000 inpatients, and 500,000 outpatients. We have about 8,000 employees and about 800 doctors on staff. We are affiliated with six community health centers (one of which we own); several community hospitals and physician practices; and we own and run two off-site clinics in Chelsea and Lexington and one small community hospital in Needham.

So, if you were on my board, how would you set an appropriate salary? You might look at the competition, and as the Globe notes, the salaries for most of the Boston-area hospital CEOs center around the same level. Would you look at salaries of people in for-profit companies, and, if so, how do you measure comparable size and complexity? Would you look at salaries of other types of non-profits, like universities and museums?

And, of course, how do you measure performance, so that the salary does not get out of whack with expected results. (By the way, for a broader survey of non-profit salaries, check out this site from Charity Navigator.)

This is serious business that affects both the perception of hospitals in the public eye and also the ability of hospitals to attract the talent they need to run a complicated organization that is vital to the community. What do you think: Do I get paid too much? Here is your chance to send a message to me, my board, or the community at large. I promise, all comments will be included (unless you use bad language!)

64 comments:

I am very impressed that you'd be willing to open this very private aspect of your professional life to public discussion. You appear to be unique among your fellow CEOs in your willingness to hear feedback from the public.

As to the question of whether or not you earn too much, in my opinion, it depends on whether or not you feel that your compensation should be a reflection of your economic productivity (I should make more if I help the institution earn more), or if it should reflect some other value that you add to society (e.g., contribution of knowledge, helping others, etc.)

Just for background, I am a third-year fellow in a pediatric subspecialty program. I'm nearly 40 years old and I have two doctoral degrees. My salary is about $60,000 per year, for I work far more than 60 hours a week. This is not a gripe or complaint in any way - just the facts. My salary information is no big secret. The compensation for residents and fellows has been a hotly-debated topic and the specific salary information for programs is publically available - often posted on a program's website. Truth be told, my work is of such importance to me personally that I'd probably do it for a lot less if forced to.

As you can imagine, I have, at times, some difficulty with, for example, professional athletes being paid millions, or tens of millions, to hit, catch, or throw a ball. A thrown ball, good catch, or nice punt return doesn't directly save anyone's life. It doesn't directly lead to the discovery of new bits of scientific knowledge. So at times, it steams me a little that they're paid a fortune to play a sport in comparison to what I'm paid to help heal and to do research.

So, while I can't sink a free-throw 90% of the time, I can perform a perfect lumbar puncture or bone marrow biopsy 99% of the time. However, only a handful of people are willing to pay for my lumbar puncture skills, while tens of thousands are willing to pay large sums to watch someone throw a perfect spiral pass (and millions are willing to watch mindless commercials to view the same activity on television).

This is the way our current system works: people are compensated based, to a large extent, on what their work generates in economic, and not social, terms. As a CEO you've managed a billion-dollar-a-year enterprise and helped keep it growing. You've helped raise $30 million in donations. Similarly, the football player (or movie actor, or CEO) generates much, much more revenue than I do, and if you're judging his/her worth from a dollar-generating standpoint, they deserve much more money. Do they deserve the same compensation if they are evaluated based on their social value? Well, I suppose it depends on one's values. I personally believe that jobs that provide a social benefit (teacher, scientist, artist, etc.) should be compensated at higher levels, but then I'm on the left end of the political economy spectrum.

Paul, I think that your work has both economic and social value. If you didn't run the BIDMC well, then it wouldn't serve as a good environment for training physicians and scientists. We couldn't do our job if you did your job poorly. So, no, I don't begrudge you your salary. You obviously do an important job and you do it well. This doesn't answer the question about specifically how many dollars you should get. While I'd love to earn a million dollars a year, I know that I don't need that much to survive. I've learned to live well with a lot less. I think that most of us could live with a lot less than a million dollars, using the excess to help those who aren't as successful. Where you fall on this issue is up to you, Paul.

Thanks for the thought-provoking and honest post. I could write much more about it, and will probably do so on my blog. Oh, and it was a treat to get to share the Blog column in today's Boston Globe with you!

Sam

[Note: Although I get a little grumpy about athlete's salaries, I am very appreciative of the fact that all of the Boston sports teams are huge supporters of Children's Hospital Boston - the athletes and owners are very generous with their time and money. I'm only using athletes as an example, not as a whipping boy.]

I disagree with the last comment, in that your salary should be far from private. When you are in the business of accepting donations, transparency is key.

Personally, I have more respect for a well run hospital who pays a CEO for his or her talent and gets results. Contrary to the beliefs of those who incessantly wage class warfare, running a hospital is a diffucult job that requires great talent. Talent should be compensated, as long as the fiduciary duty is recognized by both the executive and the board.

A couple of comments. First, you don't get rich in America by working for a salary, even a high level executive salary. You get rich by being an owner of or partner in a successful business. In the case of professional athletes and movie stars, one could argue that they are the business.

As for CEO's and others in positions of leadership in either the for profit or not for profit sector, former GE CEO Jack Welch has commented in the past that having the right person in a key spot in an organization can make a huge difference in how well (or poorly) it performs. Since you seem to be doing a great job, I suspect you are probably underpaid. What's the right total compensation for a hospital CEO? I don't know, but I would suggest that it should be sufficient to attract and hold a high quality individual. The same holds for key management positions below the CEO level.

I'll leave the debate about contributions to society to others, but in our economic system, the better we manage our resources (including human resources) and allocate our capital, the better our economy performs and the more opportunity we all have to prosper and achieve our full potential.

My bottom line for your Board: For a $1 billion complex organization like BIDMC, the CEO's compensation is NOT the place to skimp. The best are worth a premium, and you should be prepared to pay it.

Its interesting how framing a question changes it so radically. You have incredible responsibilities, and are in a position that most people can't maintain for the long term. For this you deserve to be well compensated, and your income seems fair.

However framed another way it seems less fair. For instance, you could be paid only $.5 mil (certainly a livable salary) with the other $.5 mil used to pay for additional 10 or so nurses on the floor.

How many more errors could 10 additional nurses help avoid? How many more patients could have their suffering treated faster and better? How much stress could 10 extra nurses alleviate from current nursing staff, making them happier, less distracted and more effective?

Does that $500,000 deliver more value to the hospital and its patients being paid to you, or to 10 additional nurses, or to something else? I think is the question to ask, not how your salary compares relative to others.

By no means am I suggesting that you do not deserve your compensation. Poor hospital leadership can be disastrous in very real ways for everybody involved. I'm just exploring what happens when we reframe your question in a different way.

Paul, will you adopt me and my kids? We live in the same city on $30K and we can barely afford food. Seems to me that you would make a great daddy and granddaddy. Plus, I'd help you with your blog. Pleeeese?

Paul, for someone in your competitive position you do not get paid too much at all.

Lets say you work 50 hour weeks (doesnt include blogging) and so you average around 2500 hours a year. You are thus being paid $260 an hour.

I had to double check my calculator, but yes the price of two consultants or one healthcare vendor executive who drops by your organization, goes to a few meetings, dials back in to headquarters, and spends corporate dollars on fancy dinners.

Well, in my opinion being the head of a billion dollar *healthcare facility* you can rest easy on whether you are providing value for money (just keep hitting those incentive targets to cover your taxes).

Thanks for your blog. I think your honesty deserves a honest response as well. All the butt-kissing and rationalizing in some of the earlier posts was getting to me.

I am a physician practicing in a large academic hospital. Frankly, I believe the compensations for CEOs, whether for non-profits or profits, etc., are as high as they are primarily because BOD members, CEOs, CFOs and the like are all essentially members of the same high-net worth club and simply see themselves in a different light than the rest of the workers in an organization. They have the capacity to give themselves nice compensation packages, so why not? BOD members are probably considering future reciprocation, or are reciprocating for favors bestowed on them by others in a similar situation in the past. It's the fox guarding the chicken coop essentially. I don't blame such persons for taking such actions, anybody would. Kudos on the dedication to the job and the extremely hard work to get into that position, btw. However, it's really hard to believe that anyone who is responsible for the terrible state that our hospitals and healthcare system are in "deserves" such pay. The self-congratulatory brochures and reports that are generated in the executive suite attempt to put a nice flashy veneer on the massive, atrocious, and pervasive problems, but anyone working in the trenches knows how poorly hospitals are run, how disorganized things are, and how many errors occur over and over and over, etc. etc. etc. I spend more than half my clinical time apologizing to patients for one hospital or system-generated problem or another. Btw, us doctors don't do so great as a group either; we are just as much to blame for how bad things are. Perhaps we need to spend more money (by way of CEO salaries) to attract the talent to fix these problems, but, call me cynical, my gut feeling is that many CEOs are careerists, who take a job to post a few favorable metrics, massaging some data if they have to, and building up their case for the next big job with even more eye-popping compensation figures. Shaq and Tiger Woods and the like "deserve" the 100s of millions they make for the entertainment that they provide for BILLIONs of people across the world, who voluntarily spend money or elect to appreciate their talent for the things they do (as well as their ability to market products). A million a year for a hospital CEO? Probably overpaid in my book.

Another thing that bothers me about high executive salaries in nonprofit healthcare is that these organizations tend to portray themselves to the public and patients as selfless charities. This is a constant theme in the advertising done by religously-affiliated hospitals.

But then when it comes to compensation for executives, they suddenly become complex billion-dollar organizations that need to act like for-profits to recruit competent managers. That mentality can seep across the organization and the mission starts to fall down the list of priorities. It becomes much easier to focus on opening a unit that provides concierge care to wealthy patients instead of pushing to provide more charity care. It gets easier to leave nursing aides and housekeepers without affordable health insurance for their own families.

This isn't a shot at Paul as an individual. It's an issue across nonprofit care and other sectors, too. (Notice how university presidents suddenly deserve forprofit CEO-caliber salaries now, too?)

Paul:Relative to other CEOs, professional athletes, entertainers and the like, you are not paid nearly enough. Relative to the doctors, nurses, janitors and technicians who do the work of your fine organization, you are paid too much. When you (surgically?) remove the value judgments and simply look at who you are, what you do and where you do it, you are fairly compensated. The problem, of course, is that we live in an unfair world - a world not of your making. You are the right person in the right job, which is rare enough. You can sleep soundly, knowing that your organization is getting excellent value for the dollars paid to you. In this case, it's not a matter of too much or too little, but just right. Kudos to you and to your board, for doing what's best for your organization.

If talking about what you earn isn't too private, what about talking about what you spend it on? I find it hard to imagine what I would do with that much money while at the same time adhering to a personal commitment to tread lightly on the planet. The temptation to consume environmentally unhealthy products must be big. If you donated the bulk of your money to Greenpeace (to name but one possibility) then I'd say rake in as much as you can and use the power the money confers to promote right livelihood values. If the money is going into a bigger house that consumes more energy and generally more consumption, then I'd say give some back to the institution and scale back the old lifestyle.

I guess you could ask yourself, what's the least amount of money you (as a qualified CEO)would be willing to make before you considered another job. If the number in your head is less than what you get paid (

Like many of the other commenters here, I appreciate your willingness to discuss this issue in an open forum. Thanks.

I am not at all ambivalent about CEO salaries. In my opinion, CEO salaries in general have gotten seriously out of whack compared to other people lower down the organization, period (more than 170 times that of the average worker, I just read online, up from 68X in 1940). When all the salaries in a category have become disproportionately too high, just looking at how others in that category are paid doesn't answer the question "am I paid too much?"

I don't mean to diminish the importance of your job, or the need for great skills and talents. But "what the market will bear" is especially not a fair measure in a heavily regulated industry like health care, where market forces have been misshapen by numerous laws and regulations.

Yes, a hospital CEO has a job that requires great skill and has great importance. So does the governor of the Commonwealth. Is your job really seven times more difficult and valuable than the governor's?

And if the CEO gets a hefty 30% bonus for the hospital meeting certain standards, do all the staff members get similar bonuses? If not, why not? Are better results really all due to the executives who come up with a plan, and not to the people doing the work on the ground implementing the plan?

I believe many jobs would have higher salaries if those salaries were set by a committee of their peers, instead of people higher up the food chain who value their own skills and responsibilities much more highly than they value others'.

I'm on the Board of a small state-contracted day care center. We don't pay our Director enough. This is mainly because that line item on the state budget is pitiful. Most times she doesn't take a raise in order to give it to staff. I worry about this because I know we are not going to be able to replace her on what she is earning. that should be a criteria. Can any CEO be replaced with someone equally as good who does as much for less. Maybe, but in your case, I really doubt it. While I don't believe there is a sports athlete out there worth what they are paid, I do believe you are. I may be wrong, but I get the impression you know what is going on everywhere in your hospital. I am a patient there. It "feels" better since you've come.

Last week I again heard on NPR that a generation ago CEO's averaged 40x the pay of the average worker, and today it's something like 200x more. The details aren't important ... what I saw in this post is that if Paul's total compensation (including insurance premiums etc) is $1m, then the old-fashioned 40x ratio would mean the average worker should be making $25k.

So if the average worker at BIDMC makes $25k, then Paul's pay is consistent with the generation-ago ratio.

Beyond that, all I know is that there's a hell of a lot of responsibility in a CEO's job, not the least of which is that if the enterprise tanks, there AIN'T no jobs for the workers. Let's not forget that BIDMC was in something of a tailspin when Paul came on board. To bring the place out of the tailspin, without being a "Chainsaw Al" sort of executive, and while putting EXTREME value on the contributions of employees, is quite an honorable achievement, beyond what the average CEO today has ever achieved.

Hell, folks, I remember a couple of years ago when Polaroid was in bankruptcy and the executives who got 'em there asked the board for million dollar bonuses to keep them from quitting!

Your salary should be public knowledge, and I am glad to see that you put it out there. However, I wonder if you put it out there knowing that your CEO salary is at the lower end in Boston? I am sure the CEO of MGH or BWH is larger than yours.

However, as a nurse who has worked in several hospitals in her career, I am blown away. Wow. What does one do with that sort of money? Again... wow.

I wouldn't want your job, but I would like a piece of what you make. My husband and I's salaries combined don't even come close to your bonus alone. I guess that, despite the great job you have been doing, I find it hard to believe anyone is worth that sort of money. Pro athletes and Hollywood types included.

Maybe you could sponsor a "Shadow a Hospital CEO" for a day... put me first on the list, please. Maybe then I could get a better feel for what you do and what your salary is.

Oh... would you mind posting what nursing administration makes? A range would be fine.

Paul, First I want to say I have been a big fan of our blog for some time now. As someone who is new to the world of Healthcare (but quickly learning!) I find it both easy to read and insightful. In terms of compensation, I don't think you are over paid at all. I frequently consult with CEOs of hospitals and know just how hard many of you work. (Case in point, a CEO of a midwestern hospital emailed me Sunday afternoon last week-he was still at work!) The sheer scope of the situations you deal with entitle you to a high level of compensation. Thanks for continuing to write! I've learned a lot from your blog!

Pay is associated with performance and boards are responsible along with others for defining performance.

Truth be told, paying for performance is not something that many organizations of any kind (non profit, commercial and government) are skilled at.

Paul, you are demonstrating here that even if you have not mastered leading a culture of pay for performance (which health care is not), you are a model for it. Pay for Performance begins with open about what you are paid and why.

Today, I read this entry on Bush's comments about Pay for Performance:

I was reminded of a change at Apple. When Steve Jobs returned after Gil Amelio was ousted by the Apple board after the years of Pepsi's Sculley (who got rid of Jobs) and Michael Spindler, Jobs came back for a salary of $1.00 a year.

I wonder if Bush based on his approval ratings would cut his pay to $1.00 a year?

Our whole notion of the economics of health care is built based on a payer scheme and a reward system that re_enforces expert domination, as Pulitzer Prize Winner, Paul Starr first wrote about in the 1980's.

My research along with many others suggests that Philanthropy is a new form of investing and can be that for health care. The question becomes what would happen if every hospital had an endowment large enough to fund each bed and the care provided to each patient for best practice. Now wouldn't that be an entirely new conversation that shifts the view of universal health care.

Paul,I find it interesting that your question led more to a discussion of the morality of compensation. People who talk about the multiplier between "average" workers and CEOs must consider that many of those average workers also earn a huge multiple over what their job earns in other global markets. The smartest person was the woman in the State Contracted Day Care Center. Your pay should be: a. Market price (cost to hire a similarly talented and experienced replacement) and b. Incentivized for proper performance. That you include patient satisfaction and outcomes shows that your bonus is tied to driving the right kind of performance throughout your organization. If you said your bonus was guaranteed, I'd say you were overpaid regardless of the size of the bonus. (remember Bob Nardelli, Home Depot, CEO, recently fired for driving stock price into the tank, and refusing to discuss his 200+ million guaranteed pay pkg).Forget about multipliers and athletes. Do the job for the about the same as the cost to replace you, and be incentivized for acheiving well-aligned performance goals.

Paul As others, I am also very impressed with your openness in such a political issue.

I completely endorse your salary. I think in a capitalist economy, salaries should be commensurate to the contribution of the individual. We need to pay as much as it is required to attract the most suitable talents.

Infact, I dont even find anything wrong in atheletes earning more money for just catching a ball. I dont think being a doctor is socially more noble than playing baseball, and therefore deserves more respect and pay. If hospitals help people live longer life , entertainment helps people live happier life . In the end, what good is the longer life, if you werent not happy in those extra days.

As to someone trying to reframe the question, by saying we could pay you 0.5 M and spend the other 0.5 M in hiring extra nurses. Well, the thing is, Paul would perhaps move onto an organization that pays proportionate to his talent. Or may be wont strive so hard if not paid proportionate to his efforts. And therefore, this move might actually be counter productive. Its not a simple linear system, you see.

The job of a CEO is to grow a business. Our hospital represents the toughest type of business to grow in America, with arguably the most restrictions (aka, insurance companies, OSHA, JAHCO, the US government, state government, the FDA, etc. etc.) As I've been able to sit with Mr. Levy in meetings (always in the corner ;) I have seen first hand that this man is the right person to lead BIDMC and to help us stay in the forefront of medicine in the US. As long as BIDMC continues to thrive, his salary is not a big deal. The bigger issue is how we are going to incent people to go to medical school, pay an average of $150,000 to do so, and make $50,000-$60,000 a year for the next 3-6 years before taking a job that starts at only $140,000 or so... medicine is now a service profession, not smothered by riches, prestige (look at those lawsuits piling up!), or even respect. Dr. Levy- keep your salary, but fight for your young doctors. It's pretty bad out here for those of us with tons of debt, and little to look forward to.

Along with the other commentors, I appreciate your open disclosure of your salary. As a BIDMC employee, though, I cannot help but reflect on my own salary. Working as a mid-level administrator in a not-for-profit hospital, I have come to terms with the fact that my salary is much lower than my counterparts in private industry. I accept this (along with my heavily regulated and equally small 1-3% annual raise) because I enjoy my work and feel rewarded by my service to the BIDMC patients and my fellow staff. Although it appears from previous comments that your salary is also much lower than your counterparts in private industry, I still find the $1M to be astounding.

Have you considered better helping the administrators who dream of rising the ranks and "running a hospital" as well? The current tuition reimbursement at BIDMC (which is lower than any other Boston hospital – I’ve done my research) is $1500 per calendar year pre-tax. In my Masters program at $830 per credit hour, I am reimbursed each year for approximately half of one class. As I fall deeper in to debt, the rewards of helping my fellow man are quite overshadowed by my colleagues with similar jobs in private industry who receive full tuition reimbursement and higher base salaries.

Although I have come to accept my lower base salary, I cannot shake my frustration with the low tuition reimbursement. As tuition rates rise each year, I would like to know that BIDMC commensurately addresses these increases within the tuition reimbursement program. Regardless, thank you for your great work as CEO and continued honesty - particularly as of late with the infection rates. Best.

No, you do not “earn too much.” In fact, at a base salary of $650,000, I would say you are underpaid. BIDMC was hemorrhaging before you arrived. Things are better know. However, I suspect things can get much, much better.

I like the fact that the BIDMC board has performance incentives. There is not enough of these “incentive pay based on performance” arrangements in both not-for-profit and for- profit companies in the US.

It’s also difficult to make CEO comparisons with public companies. For example, here is an all too familiar story of a typical salt and peppered-hair male CEO in the United States.

1) CEO with a history of “turning around” mismanaged companies hired by the board of directors2) CEO cuts costs (i.e., massive layoffs)3) CEO is called “savior”4) Oops, turns out layoffs didn’t work so well. The real culprit was something else.5) Company continues to incur heavy losses; shareholders unhappy.6) CEO is fired with 100 million dollar severance package.

Even though there were not massive layoffs, I believe BIDMC did have a round of layoffs. I also know that HMS helped bail y’all out. So, I would say that you are in between 4 and 5.

Even though executive pay seems to be getting a lot of attention these days, we should all be concentrating on the most important factor in business; the employee. Wages, pensions, health care costs, continuing education/tuition reimbursement, promoting from within, etc., these are the things that really matter.

great blog...I wonder how you find the time to manage it. I think Southpaw has it right about the salary - you know what salary should be appropriate for your job. If what you're getting is too much, then rebudget the difference and fill some of the many ancillary/infrastrcuture positions and needs at BIDMC that will tangibly improve patient care. If you are getting paid less than you feel you deserve, then you can take sollace in knowing that at an AMC you are in good company - either way keep up the good work, you are making a difference for many.

Second, there's a lot of talk about how Paul dserves his salary AND a lot of talk about how no one (and especially CEOs) deserve such a high salary. The first appears to be true (as best I can tell), and the second is often true. How can that be?

daniel's 6 point list is a good example. Many CEOs at least appear to move from job to job, getting large chunks of money for little valuable work (often for "work" that is a gross loss, that is, before even considering their compensation). This leads to beliefs (not unfounded) about CEOs and other high-level execs basically setting their own salaries high because... they can.

THAT is bad. THAT is what leads to people saying that CEOs don't deserve high compnsation, becaus many of them DON'T. Because, in many cases, the complaints I've just listed are SPOT ON. There's a club, and the members look after each other.

The sad part is this: a GOOD CEO is almost impossible to overpay. When the choicees the CO makes detrmine if the company tanks or makes ridiculous profits, good decision making is worth huge ridiculous amounts of money.

The disconnect is in responsibility. An exec who makes good decisions, whose company earnes millions or billions of dallars that they wouldn't have without that particular leadership, pays for themselves, and their salary should be very high. A peon who screws up at work gets fired; a CEO who screws up (causing potentially thousands of other people to lose thir jobs and/or investments) seems to get a large severance package. You can see how this might seem... not exactly fair.

So, after that long bit of writing, I can say again that it appears that you, Paul, are exrning your keep, that the hospital is coming out ahead compared to just firing you and dithering along without.

What people resent is CEOs who the company would be better off to fire, even if they then proceeded to burn the money they were paying them.

How to make money FAST in the US with no work:1) find a way to get hired as a CEO of a large corporation2) get canned as quickly as possible (for the large severance pay)3) repeat as often as possible

That this actually appears to work for some people (I've seen it in my own mid-sized company) causes great resentment, so great that it makes it difficult to appreciate those who actually do deserve the big bucks (and such pople are quit rare).

What's a wonderful teacher worth? A great teacher who inspires and treats each student as an individual and knows their stuff and makes education fun is probably worth betwen 150-250k.

What's a great nurse worth? A nurse who notices stuff, who cares for the whole patient, who listens to the family and teaches is probably worth 2-3 times what they make.

What's a great CEO worth? A CEO who leads, who focusses on the bottom line without losing sight of the mission, a CEO who has integrity and improves the organization. Such a CEO is easily worth $1 million.

Here's the problem. Most CEO's are average. Many people could do their job and yet they all think that they should get paid as if they are a great CEO. Their friends on the BOD either because they are friends, because of interlocking relationships, or because they don't want to admit that they have a less than stellar CEO go along with the charade and pay top dollar for mediocrity.

You may be worth $1 million, but the real question is are the collective leadership of Boston's hospitals worth $25 million. The answer to that question is absolutley not. There is no reason that hospital management should impose a healthcare tax exceeding $2 per person per year on the region's population. They are simply not worth it and there are many dedicated, qualified people who would do as good as job for less.

Kudos for this forum to discuss this topic and for the openness. I am a physician, and as a previous blogger noted, we're in the trenches, and see a much different medical world. It is at times depressing to see how much of a business it has become. This is not the fault of CEO's, or any one group or individual. However the most important dynamic in healthcare has been trivialized by how much of a business it has become. That is the patient-doctor relationship. This trumps all other agendas in healthcare. As far as whether this CEO makes too much, this is a free market economy, and the market dictates what too much is. If you can get it, more power to you. The problem is maybe healthcare shouldn't function under the rules of a free market economy. I happen to believe that it is right and not a commodity.

One more note, there are a lot of perks that come with CEO, for giving exclusive contracts to suppliers, etc. What would total compensation be for this CEO if we include those perks? (ie trips, etc. from medical suppliers)

"One more note, there are a lot of perks that come with CEO, for giving exclusive contracts to suppliers, etc. What would total compensation be for this CEO if we include those perks? (ie trips, etc. from medical suppliers)"

Let's look at the question: Do I get paid too much? Let's do the math: 365 days times 24 hours per day divided by $1M equals $114 per hour. Not too shabby. That's about 21 times the federal minimum wage of $5.15. But wait a minute...you don't work every minute of the year, now do you? You must get vacation time, sick time, weekends, and holidays.

Being you're an executive, I will presume you're a hard-working, no-time-off kind of guy: 315 days times 10 hours per day divided by $1M equals $317 per hour, which is about 60 times the federal minimum wage.

Now, let's look at that question again: Do I make too much money? Uhmmm. Every minute you spend in the restroom at work, or stare out your window (I'm certain you have a window in your office), or swivel in your chair (it does swivel, right?), or write your blog (if done during work) only costs your organization the hourly wage of minimum wage earner in the United States.

Why do we go to work everyday? What is our professional objective? What makes us tick...

Compensation

Whether financial, emotional, or social - there is a catalyst in all of us. It is clear that Paul's financial compensation may be higher than average person's, but I would guess that he is fairly compensated for his work in the other areas as well.

In Paul's case he lives in the microcosm of Beth Israel where he cultivates his staff and reaches for greatness. His blog reflects his train of thought as he manages his team. Feedback is welcomed and discussions are always honest but not always easy. Paul's message to his hospital is clear...dare to be different...dare to be a leader...dare to make a difference.

As a RN at his hospital I know I am part of an organization that is saving lives, healing the sick and making a difference. I don't feel threatened by our CEO's salary. I feel grateful that I am part of an organization that enables me to practice nursing gracefully.

I am not sure that other leaders, who I assume would be making the same, would offer the same gifts to Beth Israel.

I walked into work the other day and a harp was playing in our lobby. I read in the Globe that my hospital is sharing its central line infection rates with the public. I drive by the Fenway and see that my hospital is the official sponsor of the Red Sox. I jump online and see that our CEO is not only sharing how much he makes with us, but also asking what we think.

I believe that I am part of something special that is going on in healthcare. So does Paul make too much? Financially, some may say yes. However, I would have to argue that his leadership creates a climate at our hospital that is worth more than a million. When seen through this lense; he is responsible to each employee and patient. In reference to the tally of staff/hosptials/patients on his post, there are roughly 700,000 people under the umbrella of Paul's leadership. That is less than 1.50$ per staff/patient a year!

When people feel that something "special" is happening at BID, part of it has to do with the leadership. Would I pay $1.50 a year towards my CEO's salary? Of course! It is a lot less then the 100$ ticket I will pay to watch Big Papi his one over the green monster.

Paul,I'm an employee of yours at BIDMC. I think you've done a wonderful job at turning BIDMC around from the "dark days." I also think you are the most personable CEO that an organization could ask for. With that said... 650K base salary!!!! Are you kidding me??? 1 million $$$ with all the perks? When I read those figures, I was shocked. My pitiful paycheck now feels more like a slap in the face in addition to still being pitiful.

Again, you are doing a fantastic job. I just don't think that what you do warrants a million dollar salary in comparison to the job your employees are doing for a tiny fraction of your salary.

Question for you.... do you feel your salary is fair in comparison to what your employees are paid?

Here's my question, what do the other staff within your hospital make, Ie the nurses? Do you offer them crappy raises like my hospital does, while the CEO pushes us all to work harder because we are over budget and yet their salary alone would cover the budget gap. My hospital CEO is not a physician, so I think her salary is ridiculous when she makes more than the doctors who are out there saving lives. And a 3% raise at most is ridiculous, a salary cap at $17 an hr for an LPN, also ridiculous.

I'm currently a student at the University of New Hampshire and am studying Health Administration. I'll be honest, I was blown away by those figures you presented, but i'm not entirely surprised. With the way our market based system runs, having the ability to organize and control such a large corporation is impressive and well commendable.

You noted early in your post that you were given a 30% incentive compensation payment if your organization met certain quotas. I was most interested when you mentioned clinical quality. The U.S. has the most fragmented system of healthcare, with the greatest technology, the highest costs, and the most unequal access. So as a figurehead for such a successful and renowned healthcare organization, how do you judge quality?

I do appreciate your honesty in the matter of your salary. However, my major complaint is that you suffer no liability, except for perhaps job loss, if your performance is poor.

But what about the physicians that work at BIDMC? Aren't they truly the ones that suffer the liability of the system if there is a mistake or a flaw in the system? And they don't just pay with job loss, they pay with multi-million dollar lawsuits and possible personal bankruptcy.

As a non-profit hospital, BIDMC is exempt from lawsuits in the state of Massachusetts. The liability of the entire billion dollar operation is capped at $20,000. Think about that, the simple malpractice premium of any single physician practicing in your hospital is a multiple of that number. Some physicians may be paying $200,000/year which does not include tail coverage. If a nurse makes a mistake, if something bad happens it will be the physician who has to pay the price for it.

I am not necessarily stating that your hospital should be open to 100s of millions of dollars of lawsuits, but I am stating that an honest person would acknowledge their preferential treatment in the court system. You are getting a large sum with virtually no liabilty.

So when you truly talk to a physician about risk, it is not communication, documentation, empathy, good skills and knowledge which reduces liability, it is simply being on the administrative side of a system which offers immunity in the court of law.

Shouldn't we all work together -- help the physician, help the hospital, but most importantly help the patient so that if an error tragically occurs the patient can be appropriately compensated, and corrective change in the system (both in regards to the physician and hospital) can occur without the entire burden being carried by a single physician?

Hmm. Ok. Lets say medicare reimbursement for doctors was cut 20 % next year. Would people have trouble getting their knees replaced? Yes, they would. So I would say compensation for doctors has been distilled down near the minimum. Another 20% cut and you'll have access problems. Most people are just not going to want to be or become doctors, sacrificing thousands of hours in their youth to generate a middle class salary. You see this already- Next time you go to a medical clinic and the provider barely speaks English, wonder if it is because it is hard to get an English speaking doctor to work that cheap.

What does this have to do with the CEO? Frame it in these terms- if compensation for the average CEO was cut, um, 20% would industry grind to a halt? Would CEO's give up their jobs and open lawn care businesses? I think not. Would dozens of folks be fighting for a CEO job that paid 750K instead of a million? I think so. I certainly know some bright business oriented MDs who would. How about disgraced CEOs of investment banks? Does anyone really think the banks could not have got the job done for 10 million instead of 100 million?

So in those terms, if a global 20% cut in CEO pay would not result in collapse of the nations industry (and, I think you can argue that it would NOT), then CEOs in general are paid too highly and there is fat to be cut. Eventually, with cuts you get to the point where many folks would elect to do some other job (be a doctor) than be a CEO. Then you know you've arrived at the bottom line. We are seeing this in medicine- the result of fewer male applicants, fewer surgical residency applicants, etc. is reflected in huge swaths of this country lacking doctors today, with a beak outlook on the horizon. People are driving 80 miles to deliver babies, cities of 250,000 lack a neurosurgeon. But those cities do have hospital CEOs. . .

I am a Registered Nurse and have read many books related to the issues at Beth Israel in the 80"S and 90"S. Shame, shame, shame.

I believe any person making over 500,000 a year especially in healthcare is earning their profits off the backs of the sick and in some cases the dying.

I have heard all my career the term budget cut or we have to stay on budget. Well that usually requires working short, not having the right equipment or having to work alot of overtime because there's “a nursing shortage”. Well if we took half of all the CEO's money and put it in a pot ill bet it would go a long way to training new nurses, buying new equipment, paying nursing professors a fair wage, you name it. Could go a long way to fixing some of our problems in health care.

I don't admire you for you posting of the massive salary you make. I admire the nurses who daily clean up body fluids and waste with compassion for the person they are caring for. Hold the hands of the dying and hug the family members of those who have passed. What you do is easy by comparison. Nurses re making 35-60k a year if their lucky they might see yearly pay increase that in most cases doesn’t meet inflation. Not quite a bonus of 195k.

If you were such a great guy you would donate half your salary to the development of your staff and the needs of the patients they treat. I will then stand up and sing your praises. Until then enjoy your money and stop looking to others to ease your guilty conscious.

Hopefully one day universal health care will fix all this and the fat cats will be no more. Sure you will still earn a good living but it will be guilt free and waged fixed.

Healthcare in today's complex environment is anything but simple. Paul's openness about compensation is laudable. The larger issues are:

What will we as a society be willing to do in order to incentivize people to teach nursing?

What will we as a society be willing to do in order to incentivize people to enter nursing as a lifelong career?

What will we as a society be willing to do in order to make sure that the insurance industry's role in healthcare costs is totally transparent and subject to public scrutiny and regulation?

Commitment to high-quality patient care is a very admirable thing. In order for that "mission statement" to become a reality instead of an attractive piece of window dressing, the USA needs many, many more qualified registered nurses and medical doctors!

The costs of medicare and medicaid on the Federal Government is getting higher. The number of people insured is getting lower, and the insurance premiums are raising so high that even businesses can't afford them. With the baby boomers getting closer to retirement and the sickly age, what's going to happen to health care? How does a man who makes a million a year understand the strain on a family when they can't afford insurance, and all medical services are tens of thousands of dollars? I don't want to point the finger at you personally, but at all the medical and insurance companies as a whole. what does non-profit mean? We did an economics report on gall-bladder surgeries, with the use of new technologies each surgery was going to cost less for the hospitals to perform. yet to compare the price of one of these surgeries to the previous surgery are much higher. As a non profit org shouldn't the cost of the surgery be lower if costs to you are lower? Something is wrong. The only ones to blame for this mess are hospitals and Insurance companies.

My 'problem' with the system is the inequities in how patients are charged and the costs for some things that are much too high. Case in point, my father had a stent fail less than a year after open heart surgery. He had the stent replaced and the doctor deemed it necessary to keep him in 'observation' overnight. Medicare will not pay for medications for patients who are in the 'observation' status. Ok, I don't like it, but could live with it. Here's the kick in the teeth though: He was charged $160 for ONE Plavix pill, and $20 each for the remaining too. Don't get me started on what his insulin costs--not to mention $40 syringes to administer it. WHY does one pill cost more than a month's supply. I am sure that will all the patients with heart problems that hospitals can get good bulk purchase costs. So Paul, not directed at you personally, but if that is how some administrators reach their performance goals in order to get their bonuses, I think it's stealing. It is quite possible there are circumstances, etc. that I don't understand that takes the pricing out of the hands of the hospital. I am very curious about the whole thing as I don't understand sending a 76 year old man, who busted his tail everyday day of his life until retirement, saved for retirement, etc. a bill for $576 for 3 bills and two insulin shots. Thank God he was released before he had to take the rest of his mulititude of pills.

What struck me was the gigantic bonus for doing your job. Don't get me wrong, I'm not trying to come down on you.

How I see it is everyone who has a job has certain goals to meet, projects to complete, and the general expectation is it will be done well.

I certainly don't get a 30% bonus for doing my job. I don't think the average person does. And I do not think it should be part of CEO pay.

Salary should be salary period. No bonus for meeting goals aka doing your job. And no massive severance pay either. Again if the average person leaves their job - that's it. If they are fired - they're lucky to get their last paycheck. And if laidoff, a good many companies provide a reasonable severance, say 3 months pay.

CEO's getting millions for screwing up is disgusting. Case in point the former head of Merryl Lynch felt he deserved a huge severance package for running the company into the ground. but in his opinion he deserved it because it could have been worse.

That is the problem with CEO compensation. Not so much the salary but the *perks*.

You are amazing and Michael Chapman you should be so lucky to find yourself working for a real leader one day or actually become one. Prayers to our maker that you've grown up since your post.

What noone seems to realize is that with this kind of salary at your discretion I'm certain from your heart and the latest news you don't stuff it in a matress but have your very own Angel/Anonymous charities you fund.

For years upon years it is a requirement I set for my family that donations, volunteer hours and the like are kept confidential. The who, when and how much are kept confidential by using Anonymous or bogus names, yes including that of the cat.

The more our family rakes in, in a year, the more people are effected. I've personally driven hours to go pay for someone's apartment rent to be certain they were not evicted and this was not a close friend or relative and to this day they don't know where to send the thank you note. We've collected thank you notes written to different names and it is wonderful to help a person and they can keep their head up and not know who. They just praise their maker he bestowed on someone's heart to do something for their release from a pressure so they could again go forth and be productive with out a worry of how. Hallelujah.

May you continue to be blessed Paul and may more leaders follow your example. I would love to have you on our advisory board. We are a for profit that has a bad habit of operating like a 501c3.... in this way: we don't require the payment we contracted our work out for. We've become collectors to our close business partners to maintain our staff. The belief has been take care of the pennies and the (family name) will take care of themselves. It is not just us we are trying so desperately to take care of it is every last name on my payroll roster. This mistake of not pushing hard to a certain group of invoiced partners last year cost us 7 employees at the start of 2009. It would be easier to be a 501c3 our ministries we fund would be tax deductable to our end user. One day, some day, not today the time will come and I'll cherish every imagined moment of my in-laws gasping from above at the beautiful new direction the company has taken.

Again kuddos to your leadership, accept every penny and continue to invest it around you quietly.

Yes, Paul, I think you make too much. As important as your work is and as capable an executive as you are, I don't believe that anyone deserves to make that much more money than the average worker. Of course, compared to many executives who are doing jobs that are considerably less valuable to society than yours, you are a paragon of restraint. You were right to compare yourself to professional athletes who make many times what you do for a service that is certainly not as essential as the one you provide. Obviously, in general, the priorities of our entire society are open to moral censure. While millions live in poverty and cannot afford decent health care, how many of our most capable and intelligent citizens are engaged in the most trivial pursuits, inventing and promoting, for instance, yet another toothpaste that is more or less identical to all the rest? As Gandhi said, Earth provides enough for every man's need but not every man's greed. Another Indian saint added that for every man who lives in a house a thousand times bigger than what he needs, a thousand men must wander homeless.

I often read that many top executives claim that they don't work as hard and perform as well as they (sometimes) do for the money but, rather, for the satisfaction of achievement. Since I don't see too many of them turning the money down, you'll forgive me for doubting these claims. No doubt, the thrill of achievement is a significant motivator for many of these people; perhaps the tragedy is that the amount of money a person makes is so often the principal measure of his achievement. No wonder the world is in such a sorry mess.

By the standards of our society, your compensation may be justifiable, but that's only because the moral standards of our society are abysmally low.

Like many others responding to this post I would like to begin by thanking you for your candor. It was very brave and transparent of you.

I think I would first like to address some of the comments made by others responding to your post. Random limits such as $500k or $300k have been set as the "right" salary for a Hospital CEO. I would like to know how these numbers are determined. What seems appropriate to one person is grossly unfair to another. 300k may be “fair” to you, but what about the homeless man who feels that 50k is to much and everyone should make just 25k? Who decides? The government? That worked out really well in Russia. This is the reason that the market is used to determine salaries, it is arbitrary.

I would like to further point out to all of the commenters stating the salaries of mid-level administrators, nurses, LPNs or even doctors are not high enough. You choose your profession. You are obviously smart and capable individuals. If a larger salary was so important to you, or you feel you can "do the CEO's job" then why don't you?

The truth is, CEOs have incredibly difficult jobs; these positions demand excellence in candidates and I believe that Paul is underpaid. Hospitals need to behave like businesses to be successful, and businesses know that a great leader is the single most important determinate as to whether a company will be successful or not.

Keep up the good work! I hope your board knows how lucky they are to have you.

Well thats certainally a lot of money, but then everyone in healthcare gets paid alot so it has to be put in perspective. Your a Doctor so you could quite easily make $300K a year, you have a management background so that maybe is worth $500K a year in a hospital setting.

If everyone from the bottom up is getting paid well then its all good. You should make somewhere between $500K and $1000K a year, but never more than that as that could be interpreted as excessive.

The part I have a problem with is when Bonuses are large like 30% of a salary.. OK that applies to you, but does that same bonus apply to everyone else, Nurses, Technicians, Doctors, Cleaners, if so thats great, other than that Big Bonuses are a problem.

I appreciate your transparency and request for feedback on your salary.

Whenever people in certain lower paid professions—stereotypically women’s professions like teaching, nursing and social work—voice complaints about being paid less than they are worth, people say things like “you don’t go into that type of work for the money.” However, many of these same people defend and justify high salaries for individuals such as yourself. I find it interesting and ironic that so many are so quick to come to the defense of the elite. Also, I find it demeaning that lower paid individuals are supposed to subsist on just job satisfaction alone. Job satisfaction doesn’t clothe one’s children or pay for private school, the mortgage or groceries.

Another problem is that “market forces” don’t work properly since boards have no real incentive for keeping CEO compensation down. As someone posted previously, it’s a case of the fox guarding the henhouse.

Not only that, there is at times a perverse market incentive for companies to pay CEOs ever greater salaries to make it seem like they have the best and the brightest at the helm (after all, if he or she is worth *that* kind of money, he/she must be!) in order to make the company seem more valuable. Stockholders are not immune to the idea that “you get what you pay for”; it’s human nature, just as it is human nature for the individual to try to get the highest salary one can.

I don’t have the perfect solution, but I do think that the government should set rules that CEO salary should not exceed a specific (lower!) multiple of the salary of the lowest or average worker’s pay. Other countries do this.

I also think that there should be a greater emphasis on morality in business and business schools, and in fact this country. I'm sure many will disagree, but frankly it seems immoral to me to make so much money. How much money does one person, or one family, really need, especially during these trying times when so many families are suffering and losing their jobs and homes.

A little more modesty and discretion on the part of CEOs and Wall Street execs in general (not Dr. Levy in particular) seems long overdue.

A lot of comments on this blog have praised Paul for his honesty about his salary and interest in the opinions of readers. This would be a commendable action under one condition, which in my opinion appears to be sorely lacking. You asked what we think about how much you make. There are arguments for both cases, but I'm convinced it's far too much for a number of reasons. Now here's the issue: did you ask the question just to look good, to be transparent and different and seemingly honest or did you ask because you cared? Despite the negative public opinion and the worsening economy and the nursing shortage and other problems in health care, your salary is still the same. Did you ask with any intention to change, or you are listening with a deaf ear? What do you intent to DO about it?

I think the amount of money that any CEO makes at the hospitals in Boston is ludicrous. There is proven research out there that states that quality of care, occurrence of medical errors, and even mortality is closely related to the number of nurses on staff at a given time. So, my question is, if you are getting paid such a high salary for "delivering results" what results are they? Are they improved health and quality of care? Because if they are, a good portion of your salary would be better spent on the salaries of additional nurses. I think that lower mortality should be a key consideration in the performance of a hospital; your salary may only be taking away from the ability of your employees to provide care.

Since writing this blog post many months ago, I voluntarily reduced my salary by 10% and made myself ineligible for any portion of the 30% performance bonus for which I would have been eligible. This was part of an effort to avoid layoffs in the hospital during the economic bad times.

Our VPs likewise took a voluntary 5% pay cut and have foregone bonus opportunities as well.

More here on this and other steps we took to avoid layoffs: http://runningahospital.blogspot.com/2009/04/paul-solman-on-pbs-tells-bidmc-story.html

In order to answer if you get paid too much...tell us how you react to a quote from the head of health care at one of America's largest corporations, "there is a massive amount of spending on things that really don't help patients, and even put them at greater risk. Everyone that's informed on the topic knows it, but it is such a scary thing to discuss that people are not willing to talk about it openly."

I am very impressed that you'd be willing to open this very private aspect of your professional life to public discussion. You appear to be unique among your fellow CEOs in your willingness to hear feedback from the public.

I do not think it is all about what others percieve of your value and its worth, but rather at the end of the day what have you achieved for the benefit of your respective employer? And is it all because of you or with the assistance of others whom may very well be under compensated? Value is purely speculative it there is no measure of quality and performance to measure it against. If an corporation has a clear and concise goal for an individual to reach, they too must apply a value to that goal. Depending on how they measure their successes will depend on the compensation one deserves for obtaining that goal. So to ask if you are compensated fairly, either for the benefit of you or the benefit of the hospital, there is not a clear cut explanation without the measurements of the accomplishments that you directly contribute too.

Contrary to the beliefs of those who incessantly wage class warfare, running a hospital is a diffucult job that requires great talent. Talent should be compensated, as long as the fiduciary duty is recognized by both the executive and the board.

I am a subspecialist physician in one of the large academic centers, and my wife has her own small business. Our combined income has handily exceeded $1m for the past two years. She makes twice as much money as I do. I wish she made more!

Do we deserve the money? When I think of my wife's small business the question seems ridiculous: Her clients simply pay her what they think her services are worth. And she works very hard to make her services worth more than what her clients pay her. Her income is high, and her clients' benefit higher still. In this mutually beneficial arrangement, who deserves anything?

Are you (or I) any different? Is the concept of "deserving" a false idea predicated on parental conceptions of reward for good behavior? Is the hospital your "parent" who rewards you for a job well done?

You are clearly a person with high abilities. No doubt, like my wife, you will find arrangements in which you are compensated for your expertise - and these arrangements may well lead to greater long-term income than the CEO role. Maybe when it's your own shingle on the door, people will recognize that no person deserves a high income any more than they deserve to be healthy.